Health Care Reform: A CLASS Act?

One of the little-discussed parts of the recent federal health care reform was the Community Living Assistance Services and Supports (“CLASS”) Act, which has created a new federal long-term care insurance program. Participation is voluntary for workers through a payroll deduction system.

The CLASS program is intended to help participants maintain their independence and to support impaired persons wherever they are living. CLASS benefits cannot supplant or replace Medicaid benefits or any other federal, state, or locally funded assistance program, and must be treated as additional benefits. The CLASS Act explicitly allows compensation to a family caregiver.

Premiums would be the exclusive funding source for the program, and would be based on the age of the individual when enrolling in the program but not on the condition of their health. Participants in the program would be required to pay premiums for a minimum of 60 months before being eligible for benefits. Working persons could opt out of this voluntary premium deduction program, but premium penalties would apply if they decided to enroll at a later date.

The Act provides a sliding scale cash benefit averaging $50 a day that could be used to purchase home and community-based long-term care assistance and other non-medical services, including home modification, assistive technologies, accessible transportation, homemaker services, respite care, and personal assistance. The actual daily benefit amount a participant received would be based on his/her functional limitations. Benefits would be payable for as long as an individual remained eligible, and there would be no lifetime benefit limit.

It will be interesting eventually to hear about what long-term care insurance companies think about the CLASS Act. Whether CLASS represents a good federal benefit or a mere changeable promise remains to be seen. Like Social Security, where the “trust” fund contains only an IOU, the CLASS premiums will be used to make the federal budget deficit appear smaller than it actually is.

My initial impression is that the program will be a great benefit for older working persons, as they won’t have to pay into the program for very long, then they will receive lifetime coverage. That means that younger workers who begin paying into the program now will probably have their rates raised after funds are drained by the older generation.

Time and lack of energy prohibits me from adequately responding to Brian’s CLASS summary. Very detailed information can be found at http://www.ClassActProvisions.com The devil, as always, is in the details but it is apparent that the plan may never adequately get wings due to its complexity. For premiums to be competitive, and sustainable, employers will need to embrace CLASS as to generate considerable participation. Yet employers will need to manage three “classes” of participants. Enrollees who opt in, dis-enrollees who opt out, and re-enrollees who opt back in, after opting out. And then there are the premiums, premium penalties, and credits which need to be tracked. Will employers take this on, or shrug with a “why bother” ?

Projected (not yet official) CLASS premiums are quite high, and most reasonably healthy individuals will find private insurance more competitive – and comprehensive. And here lies a conundrum. If only reasonably unhealthy individuals subscribe to CLASS, adverse selection will sink it. CLASS regulations require sustainable premiums without tax dollar support. As it relates to lifetime, or unlimited duration CLASS benefits, this will prove to be illusory at best and quicksand at the worst. CLASS will not provide comprehensive benefits, and they are primary to MassHealth. Most beneficiaries will slowly wither , as personal assets will inevitably dissipate to spend down levels. Many more people would probably be better served with private insurance that qualifies for the MassHealth exemption.

Finally, for now, CLASS is picking up media steam. One only needs to search CLASS provisions, Federal CLASS insurance, etc to see how much information is coming out. Employers will need to become quite conversant. And real employee education will need to be compulsory. The potential for employer liability for not providing adequate employee education may ultimately be a good thing for CLASS – and the insurance industry. I see room for a win/win with increased scrutiny – and awareness. And a national dialogue too.
Craig Davis
President
RetirementGuard